BSkyB Profit Up As Hacking Scandal Continues

LONDON — British Sky Broadcasting PLC, in which Rupert Murdoch's News Corp. has a large minority stake, saw its first quarter profits rise further as increasing sales of telephone and broadband packages offset a slowdown in new television subscriptions

The company said Wednesday that profit on continuing operations in the three months to end-September rose by 24 percent to 225 million pounds ($355 million) from 182 million pounds a year ago. Revenue increased 8.5 percent to 1.66 billion pounds as customers rose by 4 percent to 10.4 million.

BSkyB shares spiked 4.4 percent at 705 pence on the London Stock Exchange.

"Against a grim economic backdrop, these are very good figures," said Steve Malcolm, analyst at Evolution Securities, who rates the shares as "buy."

BSkyB said 28 percent of its customers have signed up to its triple play of TV, broadband and telephone services, up from 23 percent a year ago.

Earlier this year, News Corp. had to ditch its bid to take full control of BSkyB in the wake of a phone hacking scandal and alleged bribery of police at its Sunday tabloid, the News of the World. When the scandal became the number one news story in Britain in July and prompted the subsequent pulling of the News Corp. bid, BSkyB shares slumped from around 850 pence to a little over 600 pence a month or so later.

The phone hacking scandal has raised questions about the position of BSkyB's chairman, James Murdoch, who also chairs News Corp. subsidiary News International, owner of the now-defunct News of the World.

James Murdoch has been recalled by a House of Commons committee to answer questions about his role.

Former News of the World editor Colin Myler and former legal adviser Tom Crone have said that James Murdoch was wrong when he claimed in earlier testimony that he was unaware of a critical piece of evidence suggesting that illegal espionage was far more widespread at the tabloid than claimed.

Myler and Crone insist that Murdoch was explicitly told about the evidence in 2008.

A more detailed look at the figures showed that BSkyB got a break fee of a 39 million pounds from News Corp. – the fee covers regulatory and other costs which are due if a bid is terminated.

The company also garnered 77 million pounds worth of sales of set-top boxes to sister broadcaster Sky Italia, up from 48 million pounds the year before. Sky Italia is 100 percent owned by News Corp.

In its statement, BSkyB made mention of a decision by the European Court of Justice which found in favor of a British pub landlord who used a foreign decoder rather than one provided by Sky. The company did not comment on the potential impact on its earnings, but said it remains to be seen how U.K. courts will apply the judgment.

BSkyB also expects to benefit by adding Formula 1 auto racing to its program package. The British Broadcasting Corp., which had exclusive rights to show Formula 1 but is under pressure to cut costs, agreed to a deal in which it continues to broadcast half of the races including the season finale while BSkyB gained rights to show all of them.